By Benjamin Horney

Law360 (September 9, 2020, 10:39 AM EDT) -- LVMH said Wednesday that it won't be able to go through with its planned $16.2 billion acquisition of Tiffany & Co., causing the American jewelry retailer to file suit in Delaware alleging the French luxury goods conglomerate is unlawfully using the COVID-19 pandemic to try to avoid completing the deal.

According to LVMH Moet Hennessy Louis Vuitton SA, after "a succession of events which undermine the acquisition," including economic disruption from the coronavirus pandemic and the potential for significant taxes on French products by the U.S., the company's board of directors met to review the situation and ultimately determined that the deal should be nixed. The LVMH board recommended that the company defer the acquisition until after Jan. 6, 2021, and pushed it to extend the "outside date" in the merger agreement from Nov. 24 to Dec. 31. That move, in effect, prevents the deal from closing, according to LVMH.

Because of those elements, and considering the original legal analysis of the deal, "the board decided to comply with the merger agreement signed in November 2019 which provides, in any event for a closing deadline no later than November 24, 2020, and officially records that, as it stands, the Group LVMH will therefore not be able to complete the acquisition of Tiffany & Co.," LVMH said in a statement.

Tiffany is not taking the termination of the deal lying down, however, issuing a separate statement on Wednesday decrying the decision from LVMH and announcing a planned lawsuit in the Delaware Chancery Court. The lawsuit seeks an order requiring LVMH to complete the deal as required under its terms, and refutes the idea that LVMH can avoid finalizing the deal by claiming Tiffany has undergone a material adverse effect or breached its obligations under the agreement. Additionally, the suit says that under the terms of the deal, LVMH is on the hook for all risk related to antitrust approval and all financial risk related to "adverse industry trends or economic conditions."

"We regret having to take this action but LVMH has left us no choice but to commence litigation to protect our company and our shareholders," said Roger N. Farah, chairman of the board of Tiffany. "Tiffany is confident it has complied with all of its obligations under the merger agreement and is committed to completing the transaction on the terms agreed to last year. Tiffany expects the same of LVMH."

Tiffany hopes to expedite the Delaware proceedings, saying it would like to obtain a ruling prior to Nov. 24 so the companies can complete the deal under the terms that were agreed.

The companies unveiled the deal in November, an announcement which came after some back and forth between the duo. Originally, in October, LVMH offered to buy Tiffany for $14.2 billion, and the company ultimately upped its bid to $16.2 billion, or $135 per share in cash. 

Skadden Arps Slate Meagher & Flom LLP advised LVMH, with Cleary Gottlieb Steen & Hamilton LLP providing antitrust advice. Sullivan & Cromwell LLP advised Tiffany.

In June, it was reported that the CEO of LVMH wanted to bring Tiffany back to the table to renegotiate the deal because of difficulties facing the retail sector, including social unrest in the U.S. and continuing effects from the pandemic. Tiffany reportedly did not believe the deal warranted renegotiation.

This does not represent the first major deal to face difficulties in the wake of COVID-19. Other examples of transactions that have come into question as a result of the pandemic include Simon Property Group Inc.'s planned $3.6 billion acquisition of struggling indoor mall operator Taubman Centers Inc., as well as Wex Inc.'s planned $1.7 billion deal to buy two travel payment businesses.

--Additional reporting by Andrew McIntyre and Joanne Faulkner. Editing by Katherine Rautenberg.

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